Stigmatizing Capitalism is a problem in India

In the preface to the Economic Survey of India, 2017-2018, Chief Economic Adviser to the Government of India, Arvind Subramanian writes, “The Survey strives to combine rigour with readability, a challenge that increases in the same proportion as attention spans shrink (from absorbing op-eds to scrolling down tweets). The Survey’s aim is always to build a portfolio of contributions, combining description, new data creation, deep-dive research, and provocative policy ideation.”

Keeping his promise, he almost immediately quotes T.S. Eliot towards the end of the preface, “In addition to the many challenges involved in such an effort, all writers of the Survey must guard against the dangers of staleness expressed by T.S. Eliot:

For last year’s words belong to last year’s language. And next year’s words await another voice.

Indian economics and rains have an infrangible relationship. It served right then that when it was raining outside, a full house auditorium and another full room inside the Bangalore International Centre hosted the session Thinking Heads: Economic Survey 2018++ on 2nd April 2018 where Arvind Subramanian was in conversation with Entrepreneur and Change Catalyst, Nandan Nilekani. Arvind spoke about the Economic Survey of India, 2017-2018 and about the state of the Indian economy in the first part of the session. The talk was followed by a conversation between him and Nandan.

Speaking about the perils of stigmatization of capitalism in our country, Arvind said,

Capitalism has been stigmatized over the years. This has made it extremely difficult for India to embrace capitalism wholeheartedly. Good regulations are important and we can’t embrace market and capitalism completely. The fear that we would keep helping the private sector, is the kiss of death. World over, we are seeing a greater role for the state.

He pointed out that the GST story was a wonderful development in India. Without going into the disputes over tax compliance etc., he impressed upon the audience that as a political entity, India showed that cooperative federalism could really work. Globally more and more entities are thrusting their political power. What happened during Brexit, what’s currently happening in the US are the examples of that phenomenon. In that light, we 29 plus 1 quasi-sovereign states relinquishing power for common good was a great thing to happen. He added that more such problems like agriculture which are essentially state subjects but has the intervention of the Centre too would be needed to be solved in a similar way.

Nandan began with the much-discussed issue of privatization of Air India. He brought in a larger question of why public sector entities are privatized only when they become completely irrelevant. Even, for Air India, why was privatization not done well in time? He asked if we were in the same lane in the case of public sector banking. Arvind emphasized the policy that we have in our country. We don’t privatize public entities, we improve the private but that has clearly not worked for the banking sector. The model of shrinking the public sector and privatizing it hasn’t worked. What works for Air India is that we almost have a general consensus about it. However, for banking, we do not have it yet. On being asked about the rapid decline of the public sector, Arvind said that the decline will eventually happen if we do not make efforts to reform it. There were already efforts being made to do that.

Aravind Subramanian and Nandan Nilekani

Arvind spoke about the regulatory efficiency in our country and opined that we have made good progress in capital markets but something like state-level electricity regulations can’t be called effective. Arvind further warned about the phenomenon taking place in the last 2 years wherein there was a structural shift in the ways of savers. Small savers have moved into the capital market. They think it’s safe. The problem is that on the up, it is capitalism. While going down, everything gets socialized.

Arvind Subramanian has done four economic surveys and his surveys have been marked for their differentiation on substance as well their forms on the literary side. Arvind discussed how he thought surveys should look like, from the op-ed style today to possibly twitter style tomorrow. More importantly, he stressed on the need for better storytelling and bringing in better readability. He quoted figures to substantiate his point and informed the audience that the survey had got 9.3 million hits in 1 month of its publication from unique visitors from 163 different countries. To understand the scale, one may look up at World Development Report from the World Bank. It got 1/20th of the hits at the same time. He said that his writing was a product of his studies in the last 30-40 years. He keeps thinking of the Indian economy and is a maniac at work. Crediting the structure and expanse of the Indian economy, he said that the variety itself warrants the volumes. One could write 20 more surveys and yet not exhaust the diversity and expanse of the Indian economy.

Nandan cited one of the major achievements of Arvind in bringing in talents from outside and getting them to collaborate with the Indian Economic Service. Complimenting Nandan on carrying out an exercise as massive as Aadhar, Arvind said that to bring more capacity, the interaction between civil servants and the talents outside was important. An interaction between insiders and outsiders brings in new techniques and ideas. The idea is to facilitate analysis and research from the interplay and not to parachute people. The integration was a challenge.

The conversation with Nandan concluded with Arvind recounting his hits and misses as the CEA. He mentioned the first budget where public investment was ramped up as a hit. Crediting the Finance Minister for taking care of the political aspect of GST and Hasmukh Adhia, the Finance Secretary for the implementation, he laid emphasis on the help provided by the GST report for getting a consensus. Explaining that success and flops should be seen with perspective and sometimes a few things needed more time to show effects, he termed Universal Basic Income or UBI a failure in the short term. However, he was quick to add that it had already generated varied discussions on the subject and the state of Telangana had moved in that direction with its direct assistance to farmers.

The session provided ample opportunity to the audience in attendance to put their questions forward to the guest. The CEA answered questions ranging from demonetization, cross-subsidy between high performing and low performing states, NITI Aayog, the inclusion of petrol under GST etc. On the issue of cross-subsidy, Arvind contended to be thinking deeply on the issue and hoped to have an answer in future, adding that he believed that the high performing states should be incentivized in some way.

Mr Arvind Subramanian speaks not very differently from the way he writes. His answers combined rigour with lucidity and kept the audience observant throughout the session. The session had its share of lighter moments with a few voices appealing to bring alcoholic beverages under GST. The city had already been washed with light showers earlier in the evening. The appeal was understandable.

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